How do Russia sanctions hurt Germany?

Tuesday, August 12, 2014 - 02:37

Russia sends an aid convoy to Ukraine, despite Western warnings against using help as a pretext for an invasion. Worries about the impact of sanctions are also weighing on the euro zone, especially in Germany - Russia's largest trading partner in the EU. Ivor Bennett reports

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Russia says it's a humanitarian mission.
A convoy of 280 trucks bound for Ukraine.
Their cargo: food, water and medication.
But Kiev - along with the West - fears Moscow could turn the operation into a military intervention.
Ukraine's deputy foreign minister Danylo Lubkivsky.
(SOUNDBITE) (English) UKRAINIAN DEPUTY FOREIGN MINISTER, DANYLO LUBKIVSKY, SAYING:
"Let me be clear: you don't need tanks and artillery to bring food and medicine for civilians. Stop the aggression, stop the Russian terrorists, stop the shelling, stop your cynical propaganda - and there will be no need for any humanitarian aid."
Ukraine's said it will bar the convoy from crossing the border.
Some members of parliament labelling it a Trojan Horse.
Russia, though, insists its motives are purely peaceful.
Foreign Minister Sergei Lavrov earlier claiming permission had come from Kiev.
(SOUNDBITE) (Russian) RUSSIAN FOREIGN MINISTER, SERGEI LAVROV, SAYING:
"We have agreed on all of the details with the Ukrainian government. I hope that Western partners will not put a spoke in the wheel and think about those people who desperately need electricity and water supplies to be restored and basic medication to be in hospitals."
As the fighting continues between Ukrainian government forces and pro-Russian rebels, concerns are growing in Europe over the impact of sanctions.
Germany's ZEW economic sentiment survey plummeted in August to a 20-month low.
Russia is a key trading partner for the euro zone's biggest economy.
Consumer goods group Henke l is among those already feeling the pinch - warning sanctions will hit 2nd half earnings.
Rabobank's Jan Lambregts.
SOUNDBITE (English) JAN LAMBREGTS, HEAD OF GLOBAL FINANCIAL MARKET RESEARCH, RABOBANK, SAYING:
"It is the core countries, chief among which Germany, that are being hit disproportionately by any sanctions and downside risks there. That doesn't mean their recovery is all of a sudden going in reversal, but it does mean that they're being hit harder than the periphery. And therefore the periphery's role as a safe haven, as we saw in the first half of this year, the main beneficiary of capital inflows, could continue a little bit longer."
Moscow's ban on EU food imports is also beginning to bite with Poland feeling the full force.
Farmers there have lost a market that was worth over 300 million euros last year, and many fear their businesses will go under.
Agricultural experts from all EU members are due to discuss the crisis.
Russia accounts for 10 percent of the bloc's food exports, with the ban expecting to cost 11 billion euros.